www.flacsoandes.edu.ec DISCUSSION PAPER WHO BORROWS? AN ANALYSIS OF GENDER, DEBT AND ASSETS IN ECUADOR, GHANA AND KARNATAKA, INDIA CAREN GROWN, CARMEN DIANA DEERE, ZACHARY CATANZARITE, ABENA D. ODURO, SUCHITRA J.Y., HEMA SWAMINATHAN AND LOUIS BOAKYE-YIADOM New York, June 2015 © 2015 UN Women. All rights reserved. The views expressed in this publication are those of the author(s) and do not necessarily represent the views of UN Women, the United Nations or any of its affiliated organizations. Report prepared for the Economic Empowerment Section, UN Women, New York, under the TOR “Evidence-Based Policy Project on the Distribution of Assets across Genders” Design: DammSavage ACKNOWLEDGEMENTS We gratefully acknowledge the assistance of Romina Kazandjian, William Baah-Boateng and Rahul Lahoti and helpful comments by Cheryl Doss, Maria Floro, three external reviewers and the staff of the Economic Empowerment Division of UN Women. TABLE OF CONTENTS EXECUTIVE SUMMARY 6. REGRESSION RESULTS 6.1 Correlates of who borrows 1. INTRODUCTION 6.2 Outstanding formal versus informal debt 6.3 Correlates of who borrows to accumulate assets 2. REVIEW OF THE LITERATURE 7. CONCLUSION AND IMPLICATIONS FOR POLICY AND FUTURE RESEARCH 3. THE CONTEXT OF BORROWING IN ECUADOR, 7.1 Limitations of this study GHANA AND INDIA 7.2 Policy implications and future research 3.1 Ecuador 3.2 Ghana References 3.3 India 4. SURVEY METHODOLOGY Endnotes 5. A PROFILE OF HOUSEHOLD AND INDIVIDUAL Tables DEBT IN ECUADOR, GHANA AND KARNATAKA, INDIA 5.1 Household debt Appendix 5.1.1 Household type 5.2 Individual level debt 5.2.1 Who is responsible for debt repayment? 5.2.2 Sources of loans 5.2.3 Who decides to borrow? 5.3 Debt to wealth ratios An Analysis of Gender, Debt and Assets in Ecuador, Ghana and Karnataka, India 3 LIST OF TABLES & FIGURES Table 1. Percentage of households with debt by Table 12. Mean debt-to-wealth ratios by sex and purpose of loan quintile Table 2. Percentage of households reporting debt Table 13. Distribution of debt-to-wealth ratios by by quintile and purpose sex Table 3. Mean amount of household debt out- Table 14a. Correlates of female debt standing by quintile and purpose Table 14b. Correlates of male debt Table 4. Incidence of household debt by household type and purpose Table 15a. Multinomial regression results for women: Correlates of formal debt Table 5. Mean amount of household debt out- standing by household type and purpose Table 15b. Multinomial regression results for women: Correlates of informal debt Table 6. Percentage of respondents with debt by purpose of loan and sex Table 16a. Correlates of female asset debt Table 7. Mean amount of respondent debt by pur- Table 16b. Correlates of male asset debt pose of loan and sex Figure 1a. Ecuador: Distribution of sources according Table 8. Who is responsible for the loan by purpose to initial loan values by who is responsible and amount outstanding? for repayment Table 9. Distribution of source of loan by who is Figure 1b. Ghana: Distribution of sources according responsible for the loan to initial loan values by who is responsible for repayment Table 10. Who decided to take out the loan by who is responsible for its repayment? Figure 1c. Karnataka: Distribution of sources according to initial loan values by who is Table 11. Debt-to-wealth ratios by sex responsible for repayment An Analysis of Gender, Debt and Assets in Ecuador, Ghana and Karnataka, India 4 APPENDIX TABLES Table A1. Ecuador: Volume of loans outstanding in Table A6. India: Incidence of indebtedness of house- the private financial system, December holds to institutional and non-institutional 2013 credit agencies disaggregated by state Table A2. Ecuador: Distribution of loans by purpose, Table A7. Interest rates, India, 2010 private banks vs. savings & loan coopera- tives by size, June 2013 Table A8. Percentage of households reporting expense debt by quintile and purpose Table A3. Ecuador: Loan portfolio and share of female clients, institutions affiliated with Table A9. Incidence of outstanding debt by quintile, the Rural Finance Network, December 2013 household type and purpose Table A4. Maximum interest rates, Ecuador, 2010 Table A10. Incidence by source and purpose of out- standing loans in past year, by sex, for Table A5. Interest rates of commercial banks, Ghana, Ecuador, Ghana and India 2010 Table A11. Descriptive statistics for Tables 12a and 12b An Analysis of Gender, Debt and Assets in Ecuador, Ghana and Karnataka, India 5 EXECUTIVE SUMMARY While there is a substantial and growing literature on household finance in developing countries, less is known about the borrowing behaviour of individual women and men within households: how much they borrow and for what purpose (e.g., to invest in an asset or pay for an expense), where they borrow from, decisions about taking and using credit, and the correlates of individual debt and particular types of debt (e.g., asset debt). This report addresses these questions in Ecuador, Ghana and Karnataka, India using innovative national/state level data sets collected by the Gender Asset Gap project in 2010. This study provides rich descriptive information on slightly less than half. In contrast, in Karnataka, men individual and household debt in the three countries, alone hold more than half of asset loans and women including the purpose of the loan, its source and who less than a fifth, a pattern that is similar in Ecuador, decided to take it out. Our analysis finds that two although the gender difference is less extreme. thirds of the households in the Karnataka sample have at least one outstanding debt, compared to The report also analyses the source of loans for indi- less than half in Ecuador and more than one quarter viduals and finds that while formal sector sources in Ghana. Disaggregating by type of debt, the share dominate in Ecuador, informal sources predominate of households holding asset debt exceeds the share in Ghana and Karnataka. In Ecuador, the primary with expense debt in Ghana and Ecuador, while in source of loans varies by who in the household holds Karnataka the share of households holding asset the debt; business/store credit is the primary one for and expense debt are similar. In all three countries, women and men who hold loans alone, while couples wealthier households are more likely to hold any debt borrow more frequently from private banks and sav- compared to poorer households, particularly a greater ings and loan (S&L) cooperatives than from other share of asset debt. The reverse is the case for expense sources. In Ghana, the main source of loans for all bor- debt: a higher share of poorer households than richer rowers is similar: friends, followed by family members. households in all three countries hold expense debt. In Karnataka, male borrowers rely on friends, followed by moneylenders and family. Female borrowers rely Examining individual women and men within house- largely on informal credit groups, followed by friends holds presents a somewhat different picture. In all and non-governmental organizations (NGOs). When three countries, more men than women hold debt considered in value terms, formal sector loans are for any purpose, a pattern that holds for asset and relatively more important for female borrowers in all expense debt—with the exception of Ghana, where three countries while informal sector loans are rela- slightly more women hold asset debt than men. tively more important for male borrowers. Whether individuals within households are responsi- ble for debt repayment alone or jointly with someone Another innovative feature of the analysis is informa- else is a novel contribution of the analysis. Jointly held tion on who decided to take out the loan. In Ecuador loans constitute a larger share in Ecuador than in the and Ghana, loans for which a woman alone is respon- other two countries, particularly Ghana where these sible are more likely to have been decided upon by her are negligible. In Ghana, women alone hold more alone than loans for which a man alone is responsible. than half of asset loans, compared to men who hold This suggests that in these two countries men are An Analysis of Gender, Debt and Assets in Ecuador, Ghana and Karnataka, India 6 more likely than women to decide jointly with some- The factors associated with women’s borrowing for one else (generally the spouse) to take out a loan for assets in Ecuador and Ghana are they themselves which they are individually responsible. By contrast, being an asset owner, a member of a group and in Karnataka there appears to be more joint decision- self-employed. For men, by contrast, only being in a making on individual loans, irrespective of whether a household in the wealthiest quintiles is positively woman or a man is responsible for its repayment. associated with asset borrowing while having expense debt is negatively associated with asset The study also investigates whether the correlates debt in both countries; men’s borrowing for asset of female and male borrowers differ, the character- accumulation is also positively related to their own istics of women who borrow from formal sources asset ownership. These results suggest that wealth compared to those who borrow only from informal may beget wealth. They also point to the potentially sources and those who do not borrow, and whether important role of women’s ownership of assets in the correlates of having asset debt differ for women enhancing their access to credit. The monograph and men. Our most important analytical results are concludes with a number of insights for policy and with respect to borrowing for asset accumulation. recommendations for future research. An Analysis of Gender, Debt and Assets in Ecuador, Ghana and Karnataka, India 7 INTRODUCTION1 1.